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Digitalization, retail trade and monetary policy

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  • Glocker, Christian
  • Piribauer, Philipp

Abstract

We study the role of digital transformation in the retail trade sector for the effectiveness of monetary policy. With the emergence of online retail trade, dynamic pricing concepts were introduced which reduced menu costs and rendered price changes more frequent. Our two-sector New Keynesian model implies that the real effects of monetary policy abate as the share of online retail trade rises. These theoretical results are empirically confirmed by means of an interactive Bayesian VAR model using data for the Euro area. Our findings identify a structural rather than a cyclical phenomenon for diminished monetary policy effectiveness.

Suggested Citation

  • Glocker, Christian & Piribauer, Philipp, 2021. "Digitalization, retail trade and monetary policy," Journal of International Money and Finance, Elsevier, vol. 112(C).
    • Handle: RePEc:eee:jimfin:v:112:y:2021:i:c:s0261560620302965
    DOI: 10.1016/j.jimonfin.2020.102340
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    More about this item

    Keywords

    Monetary policy; Structural change; Digitalization; Retail trade; Price stickiness;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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